Governor Abbott’s Substantive Tax Reform Plan for Texas


Earlier this week, Governor Greg Abbott announced the rollout of a thirty-three page Property Tax reform plan for Texas  at a news conference on January 16th. He threw down the gauntlet to entrenched interest groups opposing property tax reform informing Texans all over the state that tax reform continues to be  a high priority for his office. He declared:

“Texans are fed up with property taxes being raised with impunity. They are tired of endless government spending while honest hardworking people struggle to keep up with paying their tax bills. We can no longer sit idly by while homeowners are reduced to tenants of their very own property, with taxing entities playing the role of landlord. It is time to finally reform the property tax system in Texas.”

Is this political posturing on the Governor’s part considering 2018 is a gubernatorial election year in Texas? Peggy Fikac of the SA Express News seems to think so when she opened  her recent article covering the Governor’s press conference inferring his motivation is about his re-election. The Texas Tribune also framed the issue as red hot campaign material for the Governor and his party in the upcoming primaries and general election in November.

I suppose these news organizations may have a point but I wonder if these reporters have read the Governor’s writings in Broken but not Unbowed  and Restoring the Rule of Law. While the latter monograph focuses on states’ rights, the former is autobiographical and philosophical and what is clear about Greg Abbott’s approach to governance is his abiding adherence to a coherent set of principles articulated and acted upon by fellow conservatives Ronald Reagan and Barry Goldwater. Greg Abbott like Reagan before him is determined to limit the reach of government – federal, state, and local. Property tax reform is the tip of the spear for redirecting and limiting the expansion of local and county governments,  as well as school districts,  which directly threaten the economic future, prosperity, and freedoms of taxpaying property owners in Texas.

It appears that Texans agree with the Governor. In a statewide poll conducted jointly by the University of Texas and the Texas Tribune last year (June 2017), 77% of Texans surveyed want limits on local government’s power to raise property taxes. (31A.A, page 14)

How do Joe Straus and his surrogates figure in this fight for and against property tax reform? These reforms to protect the interest of property taxpayers in Texas was one of the highest priorities of the Governor for the 85th regular and special legislative sessions last year.

The Senate passed a property tax reform bill authored by Sen. Paul Bettencourt in the regular session but it never made it out of the House Ways and Means Committee. When the Governor called the special session, the Governor and the Lt. Governor were both emphatic that property tax reform was a top priority again. Then as the end of the special session approached, the negotiations  between  Lt. Governor Patrick and Speaker Straus ended in a stalemate where the Senate’s version would trigger an election requiring voter approval if the threshold of 4 percent in property tax increases was exceeded by local taxing authorities (cities, school districts, counties, special purpose districts) while the House leadership under Straus demanded a higher cap of 6%. Straus shut down any further discussions with the Senate leadership by adjourning the House session a day early. His “take it or leave it” hardball posture ended all chances for a reconciliation and substantive progress on tax reform in the biennial 2017 legislative session.

Abbott’s 2018 property  tax reform plan (Plan) points out that local outstanding bond debt in Texas exceeds $218 billion, the second highest per capita debt burden in the nation while Texas ranks the sixth highest in the nation for overall property tax burden. Property tax is “a singular cause for the growth of local government in Texas and the massive increase in the number of public sector workers.”

“School district spending continues to increase  rapidly”, according to the Plan, a major driver in the increase in property taxes. Moreover, over the past ten years, per student costs have increased from $8,300 to $10,800. Texas’ public school system would be the second largest private employer in the country if it were a private corporation. But only half of the public schools’ employees are teachers who are paid much lower salaries than public school administrators and professional support staff.

52% of the Texas state budget is spent on public school funding. According to Lt. Governor Dan Patrick in a newspaper commentary last year:

“Texas spends $60 billion on schools in our two-year budget, including both federal and state funds. Of that, $41 billion is state funding. That is on top of the estimated $28 billion to $30 billion annually paid by local property taxpayers.”

The report calls attention to the extravagant spending in public school facilities where in “the last decade alone, at least a dozen school districts have constructed football stadiums costing tens of millions of dollars each, $500 million has been spent on indoor practice facilities,  and average cost of a high school football stadium has quadrupled.”

In total there are 1.4 million local government employees in Texas representing more than 10% of all working Texans.

While Texas is considered a low tax state since the state does not collect a state income tax, much of the tax burden has been placed on the backs of homeowners whose tax burden is the fourth highest in the nation (measured as a percentage of median home value). A Senate select committee report in 2016 warned that Texas taxpayers have been facing increases in property tax bills that are climbing 2.5 to 3 times faster than median household income.

With rising home prices comes rising property taxes. When the San Antonio City Council and City Manager Sheryl Sculley brag about a zero city property tax rate increase in the 2018 fiscal year budget, they should not be given “attaboys”. Median prices for homes in San Antonio have increased by 36% over the past five years. However median household income rose only 3.7% between 2012-2015 (most recent statistics).

What this means is the City is receiving a surge in tax revenues from rising home prices with appraised values also climbing proportionally.  But San Antonio homeowners  are not faring better with proportional salary increases and they’re seeing their disposable income dropping because their property values are climbing faster than their take home pay. If Mayor Nirenberg and the City Council need to brag before their re-election campaign kicks off next year, what they should show is a serious move towards cutting the property tax rate.

Highlights of the Governor’s property tax reform plan

  1. Restraining the Growth of Property Taxes
    1. Establish a property tax revenue growth cap of 2.5 percent per year
    2. Prohibit the Legislature from imposing unfunded mandates on its political subdivisions
    3. Require appraisal district directors to be locally-elected officials, such as incumbent county commissioners, city council or school board members
    4. Prohibit employees of taxing entities from serving in any capacity with an appraisal district or appraisal review board, an obvious conflict of interest
    5. Increase fairness to taxpayers by improving the rights of property owners in the property tax appraisal process and appraisal protest process
    6. Improve property tax transparency by requiring the Office of the Comptroller to develop and maintain a comprehensive database of property tax rates and levies applicable to every property in the state
  2. Controlling Local Debt
    1. Improve the transparency of local debt, prohibit debt from being used for non-specified purposes, and restrict the use of certificates of obligation
    2. Require a two-thirds supermajority vote to approve issuance of new local debt

Who’s for Governor Abbott’s tax reform plan?

Lt. Gov. Dan Patrick:

“This is a real, bolder, bigger reform plan. I can promise you the Senate will deliver on property tax relief. That’s a guarantee.”

Republican Party of  Texas Chairman James Dickey:

I thank Governor Abbott for committing to this serious issue that all Texas homeowners must face. Reversing the trend of escalating tax burdens is an integral part of RPT’s platform, and we appreciate this first step in helping Texans. I look forward to participating with the Texas Legislature to help ensure that the Republican delegates’ voices are heard, and that Texans get property tax relief once and for all as we move to a more equitable consumption-based system.”

Who’s against Governor Abbott’s tax reform plan?

  • Tax-funded lobbyists who represent local governments
  • Local political bureaucrats – Mayor Ron Nirenberg, County Judge Nelson Wolff, Public School administrators (Read their remarks)
  • Lawmakers loyal to Straus (Democrats and Republicans) who repeatedly killed the tax reform measures and prevented them from becoming law in the Perry and Abbott-led legislative sessions.
  • Leftist think tanks like the Center for Public Policy Priorities

“The governor’s tax proposal is another attempt to handcuff local communities’ ability to provide necessary services without addressing the real problem — the state’s failure to adequately fund public education. A 2.5 percent revenue cap would be devastating to local law enforcement and other vital services. If the state caps local communities’ ability to fund roads and other necessities, will the state fund more roads and bridges?” Mayor Ron Nirenberg

Instead of getting better, it’s getting worse. With Joe Straus gone, no telling what they’ll do to local government,” Wolff said. “I’m afraid they’re going to wreck it, and make all decisions statewide.” Bexar County Judge Nelson Wolff

“In an election year, Gov. Abbott is trying to show he has a solution to crushing property taxes by capping the rate of growth — while ignoring the underlying causes of it: our failing education and health care systems.” Democratic Party Gubernatorial Candidate Andrew White

“Like the failed legislation from the 2017 regular and special Texas legislative sessions but worse, the Governor’s misguided proposal suggests that he doesn’t trust Texans to make the best decisions for our communities.” Ann Beeson, Executive Director of the Center for Public Policy Priorities

What you can do

Let your state, county, city, and school officials know you support Governor Abbott’s property tax reform plan.

This is a major election year comprising federal, state, county races. Ask your representatives and candidates about their position on property tax reform and other tax issues. The probability that significant tax reform legislation will pass in the next 2019 legislative session depends on the members of the House of Representatives and the next Speaker of the House who appoints committee leaders and members.

Review the voting record of your representatives on VoteSmart and the ratings of conservative organizations such as Empower Texans’  Fiscal Responsibility Index, and Texas Eagle Forum.

Steer clear of the organizations – “Texans for Fiscal Accountability” and the “Texas Conservative Roundtable” that do not represent the conservative agenda of the Governor, Lt. Governor, and the Republican Party of Texas.

the end